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General Court reduces fine imposed on Cetarsa and WWTE for their participation in the Spanish raw tobacco cartel

In its judgments of 3 February 20114 and 8 March 20115 the General Court has rejected Cetarsa and World Wide Tobacco España (‘WWTE’), respectively, for their actions for annulment of the Commission decision concerning the Spanish raw tobacco cartel6, but has nevertheless reduced the fine imposed on both undertakings.

Cetarsa and WWTE, two of the four undertakings that executed the first processing of raw tobacco in Spain, were fined by the Commission for their participation in a cartel on the Spanish raw tobacco market which fixed prices for the supply and acquisition of raw tobacco as well as the quantities of raw tobacco that each processor would buy from the producers. In the same decision, the Commission also imposed fines on three associations of farmers for a price fixing cartel among the producers of raw tobacco on the Spanish raw tobacco market. However, the fine imposed on the associations of farmers was of a symbolic nature (EUR 1,000) because the Commission noted that the legal framework regarding the collective negotiation of standard contracts between producers and processors of raw tobacco could create a significant degree of uncertainty about the lawfulness of the behaviour of the producers and processors of raw tobacco.

Cetarsa lodged an action for annulment of the Commission decision and invoked six pleas in law. WWTE invoked four pleas in law. The most interesting pleas from both cases have been selected for discussion below.

Cetarsa claimed in its first plea that the Commission violated the principle of equal treatment in so far that it imposed only a symbolic fine on the associations representing the raw tobacco producers, whereas it imposed a multi-million amount of fines on the processors of raw tobacco, although the producers and processors were in a comparable situation. The General Court rejected this plea in law as unfounded: First of all, the General Court reminds that it is settled case-law7 that the principle of equal treatment is only violated when the Commission treats similar situations in a different manner or when it treats different situations in the same manner, without giving an objective justification for the treatment. The General Court held that the Commission was right in finding that the producers and processors in this case are not in a comparable situation. Indeed, whereas the producers only fixed prices in the light of the collective negotiations with the processors, the latter, besides the equivalent agreements on prices in the light of the collective negotiations, also made secret agreements on the prices of supply and the quantities to be bought. For the second type of agreements there was no doubt on the illegality of those agreements. Therefore the producers and processers were in different situations, which thus allowed for a different treatment.

In its second plea in law, Cetarsa claimed that the Commission violated the principles of proportionality in qualifying the agreements as a very serious infringement instead of a serious infringement. The General Court starts with highlighting that the Commission disposes of a margin of appreciation in setting the fines, and that the gravity of the infringement has to be determined while taking into account a great number of elements. In addition, the fining guidelines are no rule of law, but rather an indicative guideline for the administration, and if the administration wanted to divert from these guidelines, it should motivate this step. Finally, the General Court reminded that the fining guidelines provide for three elements in determining the gravity of an infringement: (i) the nature of the infringement, (ii) the actual impact on the market when this can be measured, and (iii) the geographic scope of the infringement. According to the General Court, the first of these three elements, being the nature of the infringement, plays the most important role in determining the gravity of the infringement. Consequently, as the infringement in this case relates to a horizontal cartel that fixed prices and quantities, the sole nature of the infringement constituted enough ground to qualify the infringement as very serious. The other facts—that the cartel allegedly had only a limited effect, that its geographic scope was limited and that it was the first time the Commission dealt with a cartel in the agriculture sector—are therefore not sufficient to call into question the qualification of the cartel as a very serious infringement.

Cetarsa claims in its fifth plea that the Commission violated the principle of proportionality and equal treatment because the basic amount of the fine was set so high (considerably above the ceiling of 10% of the annual worldwide turnover) that the attenuating circumstances which the Commission applied did not have any impact on the final amount of the fine. The General Court simply held that the 10% ceiling applies only to the final amount of the fine and that the exceeding of this ceiling by the intermediate amounts of the fine did not breach the principle of proportionality or equal treatment.

In Cetarsa’s sixth plea, it claimed that the Commission has made several errors in the application of the leniency notice. The General Court agreed with Cetarsa that the Commission made a manifest error of assessment when the Commission held that Cetarsa contested the facts on which the Commission based its allegations. Therefore, the General Court decided that Cetarsa should be granted a 10% supplementary reduction of the fine. Consequently, the General Court reduced the fine imposed on Cetarsa from EUR 3,631,500 to EUR 3,147,300 and dismissed the remainder of the action.

WWTE invokes in its first plea in law that the Commission has violated the principle of equal treatment because it applied a multiplying factor to the basic amount of WWTE’s fine in order to reach a deterrent effect, but did not use this multiplying factor to all the other companies involved in the cartel. The General Court rejected this plea in law on these following grounds: (i) the General Court made clear that the Commission seeking to create a deterrent effect by imposing a cartel fine is perfectly legal. As to the different treatment of WWTE and some other companies involved in the cartel, the General Court first pointed out that even if a violation of the principle of equal treatment were to exist and the Commission were to apply a multiplying factor to all of the companies involved in the cartel, this would not lead to the annulment of the Commission decision because no one can invoke the benefit of an illegality committed to others; (ii) the General Court explained that in this case there is no violation of the principle of equal treatment because WWTE and the companies to which no multiplying factor is applied are not in the same situation. In fact

WWTE forms a single economic unit and thus a single undertaking with its mother companies (SCC, SCTC, and TCLT), which have significant resources, and have been held jointly and severally liable for the fine imposed. Whereas, the other undertakings also have links with international companies, but do not form a single undertaking. Therefore, the Commission was right in deciding that in order to have a deterrent effect, the basic amount of the fine had to be multiplied in WWTE’s case, taking into account the global nature and the resources of its mother companies. WWTE claims in its second plea in law that the Commission violated its Fining Guidelines and the legitimate expectations of WWTE by not taking into account several mitigating circumstances. The General court rejected this claim by pointing out that the Commission is indeed bound by its own Fining Guidelines, but that does not mean that the Commission has lost its margin of discretion in setting the fines, and consequently, in taking into account the attenuating circumstances. Therefore, the simple fact that certain attenuating circumstances are listed in the Fining Guidelines does not mean that the Commission is obliged to take those attenuating circumstance into account one by one and reduce the basic amount of the fine for each attenuating circumstance invoked. Instead, the Commission can make a global assessment of all the attenuating circumstances and grant a global reduction.

In its fourth plea in law WWTE invokes, just as Cetarsa did, that the Commission made errors in the application of the leniency notice. As in Cetarsa’s case, the General Court followed the arguments of WWTE and held that the Commission made a manifest error of assessment when the Commission decided that WWTE contested the facts on which the Commission based its allegations. Therefore, the General Court decided that WWTE should be granted a 10% supplementary reduction of the fine. Consequently, the General Court reduced the fine imposed on WWTE from EUR 1,822,500 to EUR 1,579,500 and dismissed the remainder of the action.

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